Toyota has recalled millions of vehicles, including the best-selling Camry for unintended acceleration problems. Toyota has now received a massive fine for trying to deceive U.S. federal regulators. (Source: Torque Report)

Fine is largest in U.S. history against an automaker

The atmosphere at the U.S. Department of Transportation on Monday was tense as Secretary Ray LaHood slammed Japanese automaker Toyota. Lahood announced, "We now have proof that Toyota failed to live up to its legal obligations. Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families."

Defects are an automaker's eternal enemy. Every year thousands, if not millions of vehicles are recalled for defects. Toyota's critical problem was not so much the defects itself -- despite the massive number of vehicles involved. Rather, Toyota's key mistake was the dangerous game of deception it reportedly played.

According to documents obtained from Toyota, the company began a recall on "sticky pedals" in September of last year in Canada and Europe. However, it failed to inform U.S. regulators of the problem, and made no effort to launch a recall of the effected vehicles until it came under heavy fire in January.

That constitutes a gross violation of federal safety guidelines, which demand that an automaker inform the U.S. federal regulators within five days of discovering a defect.

As a result, the DOT has thrown the book at Toyota, proposing a $16.4M USD, the maximum penalty allowed under the law. That fine far surpasses the biggest previous fine against an automaker -- $1M USD sum levied against General Motors for failing to promptly recall windshield wipers in 2002-2003 model vehicles.

Toyota has two weeks decide its response. Despite the reportedly conclusive evidence, the Asian automaker is expected to appeal the decision, perhaps seeking a smaller fine.

Meanwhile, the National Highway Traffic Safety Administration (NHTSA) continues to investigate the sticky accelerators, unsatisfied with Toyota's claim that floor mats were solely to blame. NHTSA is looking at a host of mechanical and electrical elements for bugs, and is even examining whether cosmic rays could play a role, with the help of experts from NASA.

The government continues to investigate Toyota's behavior during the recall, as well. DOT officials said more fines could brought against Toyota if further proof of wrongdoing is revealed.

While the defect mess is unpleasant for all those involved it does raise some interesting questions about governance. Some say that the government should not police companies, and that the commercial press should be left to investigate reports of defects and inform consumers of safety risk. Others argue the current system is a successful one. And still others argue that current regulation does not go far enough -- that the federal government should have the ability to levy even bigger fines against companies who knowingly make products that could endanger U.S. consumers.

Likewise, the 135 pending lawsuits against Toyota raise similar questions. Some argue that allowing such free litigation against safety critical businesses, such as automakers and healthcare providers allows citizens to take regulation into their own hands. Others argue that it hinders free enterprise, raising prices, and worse yet leads to bigger government.

"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan